Bone morphogenetic proteins (BMPs) were originally identified as proteins capable of inducing endochondral bone formation when implanted at extraskeletal sites. BMPs have diverse biological activities during early embryogenesis and various aspects of organogenesis. BMPs bind to BMP receptors on the cell surface, and these signals are transduced intracellularly by Smad proteins. BMP signal pathways can be inhibited by both extra- and intracellular mechanisms. As for skeletal development, genetic studies suggest that BMPs are skeletal mesoderm inducers. Recent studies of tissue-specific activation and inactivation of BMP signals have revealed that BMP signals control proliferation and differentiation of chondrocytes, differentiation of osteoblasts and bone quality. These findings may contribute not only to understanding of bone biology and pathology, but also to improvement of the clinical efficacy of BMPs.